Understanding Forex Trend
It is important for you as a forex trader to identify and understand a trend in currency markets because they tend to be vicious and one way. Trends in forex routinely wipe out retail traders like you and me who commit the sin of trend fading.
Forex trends start slowly and are usually the result of another action in the global capital markets. A booming stock market may lead to a massive forex trend in its wake as an example.
Likewise, a global recession may force the investors to run towards save haven currencies like dollar in their flight towards safety. Similarly fall in interest rates usually forces carry traders to become risk averse.
So you will have to keep one eye on the global macro situation developing to look in which direction smart money is going to flow. Most of the trends in forex markets are fundamentally driven by the direction of smart money flow.
The longer the trend is going to be, the longer the correction and the consolidation will be. In other words, fundamentally driven trends do not take sudden U-turns.
But mostly when the retail investors realize that a trend has developed, it is always too late for them. Professional traders, institutional investors and hedge fund have long been in the trade and are ready to dump their positions on the retail crowd.
As the saying goes, a Newsweek cover is a kiss of death for a trend. Trends are important for an individual investor to understand.
Remember trend is your friend. Trend trading is one of the most popular trading strategies employed by professional traders including hedge funds.
The best strategy is to take a position in the direction of the trend. You can easily identify a trend in currency markets using multiple time frame analysis involving moving averages.
When you have the trend identified, use Fibonacci retracement levels to enter and exit the position. If you successfully execute this trading strategy, you can make many pips in a few days. - 23226
Forex trends start slowly and are usually the result of another action in the global capital markets. A booming stock market may lead to a massive forex trend in its wake as an example.
Likewise, a global recession may force the investors to run towards save haven currencies like dollar in their flight towards safety. Similarly fall in interest rates usually forces carry traders to become risk averse.
So you will have to keep one eye on the global macro situation developing to look in which direction smart money is going to flow. Most of the trends in forex markets are fundamentally driven by the direction of smart money flow.
The longer the trend is going to be, the longer the correction and the consolidation will be. In other words, fundamentally driven trends do not take sudden U-turns.
But mostly when the retail investors realize that a trend has developed, it is always too late for them. Professional traders, institutional investors and hedge fund have long been in the trade and are ready to dump their positions on the retail crowd.
As the saying goes, a Newsweek cover is a kiss of death for a trend. Trends are important for an individual investor to understand.
Remember trend is your friend. Trend trading is one of the most popular trading strategies employed by professional traders including hedge funds.
The best strategy is to take a position in the direction of the trend. You can easily identify a trend in currency markets using multiple time frame analysis involving moving averages.
When you have the trend identified, use Fibonacci retracement levels to enter and exit the position. If you successfully execute this trading strategy, you can make many pips in a few days. - 23226
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Learn Forex Nitty Gritty. Read about Trend Forex System. Try Netpicks Forex Signal Service.
posted by X - Men @ 7:03 AM
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